Indian govt to revise FDI cap in some sectors next month

26 Jun '13

2 min read

The Government of India would revise foreign direct investment (FDI) caps for some sectors next month, Finance Minister P Chidambaram has said.

Last week, a Government Panel headed by department of economic affairs Secretary Arvind Mayaram suggested in its report that the FDI caps should be changed to three-tier structure of 49 percent, 74 percent and 100 percent, instead of the present four-tier structure of 26, 49, 74 and 100 percent.

Among other things, the panel suggested that the FDI cap in multi-brand retail trading (MBRT) should be raised to 74 percent.

In its report, the panel said on the basis of the principle of ownership and control, there needs to be only three categories. In those sectors where foreign ownership and control cannot be allowed, FDI can be permitted up to 49 percent with the definition of control.

In sectors or activities where ownership and control is not material, FDI up to 100 percent can be allowed. However, in some sectors where a degree of Indian participation is considered necessary, although foreign ownership and control is permitted, the FDI limit can be capped at 74 percent, the panel suggested.

The Department of Industrial Policy and Promotions (DIPP) will discuss separately with all Ministries and submit a note to the Cabinet for revision of FDI limit in some sectors, Finance Minister told reporters on the sidelines of an event organized by Crisil for the launch of its new Index.

The revision of upper limit in FDI is aimed at making the country more attractive to investors. While the Government has been successful in attracting FDI in single-brand retail, where up to 100 percent FDI is allowed, it has so far failed to evoke good response from multi-brand retailers.

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